Giving the three-fingered salute to oil

They say the human body is about 60% water. What percentage of New Zealand’s economy would be oil? Oil is the grease that lubricates our modern society. It’s given us tremendous power and freedom but now we’re hooked on it.

Do you think oil will ever be cheaper than it is now? Hardly any layman or expert believes cheap oil will last forever, and many believe we are nearing, or have already hit, peak oil – the end of cheap oil. Peak oil isn’t a theory, it is a geological fact. There is only so much oil in the world and at some point we’ll reach its’ halfway point, which means that no matter how much we’d like more (demand), we will never produce more (supply). An additional problem is that worldwide we’ve already got the easiest, cheapest, most accessible half so what’s remaining is the hardest, most expensive to extract and least accessible. We’re going further and deeper in our hunt for oil, sometimes with catastrophic consequences like seen in the Deepwater Horizon accident.

One of my favourite TV shows is The Wire which is about drug dealing? I learnt that when demand is high and supply low, prices goes through the roof. That’s bad news for New Zealand because we’re p-addicts. We’re petrol addicts who are 98% dependant on oil for transport, so we’re going to have to wear the higher cost of our drug of choice or crash.

Like the metaphorical question, what’s it got to do with the price of fish? Lots. Oil accounts for half of the costs of Kiwi fishers and a massive percentage of the costs of growing food, moving food medicine, the majority of our products, our exports and all those tourists that come here. In short – our whole economy. Oil is pervasive and is in everything from fertilisers, furniture and us. A study by the U.S Center for Disease Control and Prevention tested humans for chemicals and metals, and recorded 212 different compounds – more than 180 of them products that started as natural gas or oil. We’re so dependent on oil that when prices seriously rise or fluctuate widely, as seen in previous oil shocks in 1973, 1979, 1990 and 2008, it damages our economy big-time.

Remember when the price hit $US 100 a barrel temporarily in 2008? Imagine $200 a barrel or higher? Imagine if you couldn’t afford to get to get to work. What would you do? Imagine if you couldn’t afford to fill up your car or you lost your job because tourists couldn’t afford to travel here. Imagine countries converting food-growing land to biofuels production, food prices spiralling and people in developing nations starving. Imagine all the people suffering. You may say that I’m a dreamer, but I’m not the only one.

I learnt in Scouts “Be prepared.” We’re extraordinarily vulnerable in New Zealand and the sooner we get ready the better. Other nations, and interestingly militaries like the Pentagon and the German Bundeswehr, are making plans, yet we seem to have a ‘she’ll be right mate’ attitude and are ignoring it.

In fact, we’re strengthening our addiction. We’re still pouring money into new motorways. Well, more accurately, borrowing globally to fund our $10.7 billion seven Roads of National Party Significance that will just encourage more cars onto congested roads. We’re still planning to close four regional rail lines (even my beloved Gisborne-Napier line) and sprawling our cities ever-outwards over farmland, which means transport costs for those on the city fringes are very high.

We need an urgent inquiry into our vulnerability, what impacts higher oil prices would have on New Zealand and a strategy to reduce dependency – now. We need to make the most of the last of the cheap oil to transition our transport systems, energy supplies and communities towards sustainable alternatives. The earlier we start the better.

We need a plan because the worst thing we could do is focus on alternatives that are even worse for climate change than oil, like growing biofuels on former rainforest land and extracting oil from tar-sands or coal. Unfortunately, the state-owned coal miner Solid Energy, with the Government’s blessing, is starting a lignite-coal-to-diesel plant in Southland – a lignite-coal-to-fertiliser plant that will have huge greenhouse gas emissions. Like jumping out of the frying pan and into the fire.

What would an Oil Transition Plan look like? I think it would set out a pathway to reduce our dependence on oil from getting about (more fuel efficient cars, car-pooling, better public transport choices), moving stuff around (freight off trucks and onto electric rail or coastal shipping), travelling internationally (researching alternative aircraft fuels, fast ships and I kid you not – airships), communicating (super-fast internet), growing food (locally sourced organics), and electricity (wind, wave and geothermal).

The crucial part is finding local solutions. In an oil constrained world everyone will need to adapt to their own local circumstances. Across the nation Transition Towns groups are envisioning a low oil future and preparing solutions but tragically the Government fiddles while Rome burns.

What are we waiting for? I think our politicians are dropping the ball big time by failing to prepare. It’s negligent to ignore so great a looming threat. I’m not surprised though. I believe they’ve been captured by short-term thinking and corporate interests; suffer from a lack of vision; and pander to a media more interested in the latest little scandal than public broadcasting or journalism.

The good news is that many of the solutions are good for their own sake, not just for freedom from oil dependence or climate change. More walkable or cycleable cities and fast, affordable public transport are nice anyway. Car fuels that don’t kill hundreds of Kiwis every year from air pollution are a good idea, as is safe organic food. The even better news is, if we get in quick, we could sell many of the solutions around the world.

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40 thoughts on “Giving the three-fingered salute to oil”

Another question that needs to be asked is – when we do eventually transition to a variety of alternative energy fuel/schemes, for biomass based operations, *how* do we ensure land, air, and water quality is maintained.

There could well be an “oil rush” to deploy non-synergistic crops and methods with undue pressure for productivity and profit rather than efficiency and clean solutions.

Although energy and fuel security is vital, in the long term, it cannot, and should not be deployed at the expense of the environment.

We already have enough problems and issues with water quality, excess nutrient run-off, land stability etc, so if we accept we see a looming problem, and a solution for which inevitably involves large areas of land and intensive agriculture, we must also ensure supporting legislation, education, best-practices, well-thought out solutions and models are in place and/or offered to those who will manage and provide the agricultural base and feedstocks, as well as the actual processing and refining operations.

Without a well ordered plan for environmentally sensitive, well-thought out solutions put in place, we could well face similar or even greater problems than the existing issues we have with the dairy industy and other agricultural/industrial actvities.

Should be a no-brainer really, which is also why our dependence on imported fuels (and replacement with renewable alternatives) should be a serious issue for discussion at the sustainable economy conference. Such a planned move may just be good for the job-market too….

What I cannot figure out is why even the most blinkered RWNJ cannot see the plain economic benefits to NZ of replacing fossil fuels, as far as possible, with home grown sustainable power. 7 Billion in imports is a lot of dairy products.
Is it election funding from oil companies??

Some of the reported figures are clearly wrong, but the solar panels are estimated to be able to provide up to 65MWh of electricity per year, with a peak output of 20-25kW (not 20-25kWH as reported). This will save about 70% of their diesel generator fuel usage.

Agreed, it isn’t just transport fuels and methods we face as a crisis, it is our overall energy demand, distribution and use, whatever or whomever the final destination or consumer.

There will be a limit (are we already reaching it?) to acceptable hydro developments which we are heavily dependendent on as our existing major source of renewable energy.

If demand continues to rise, *and* additionally we have a greater fixed energy requirement to produce liquid fuels, then these extra energy demands will have to come from the widest possible range of other alternative renewable sources, and we need to be putting plans and strategy in place to meet these needs instead of hedging bets on a few sources of finite yield or uncertain suitability with no apparent “plan B”.

We need to see “energy” truly as it is, a mechanism for collecting power from the sun, storing it where possible, distributing where applicable, then releasing it to perform work of use, while losing as little as possible in “wasted” work or thermal pollution, with minimum emission of harmful compounds, particulates etc, impact on the environment, integrating well with existing agriculture and infrastructure, low use and degradation of water and water quality, and minimum utilisation of high energy cost materials. Not simple, but certainly do-able.

Interesting how prepared “we” (they!) are to spend much money on bailing out finance companies etc, (insert you own better examples here!) but so little (including just national effort)seems to be invested in the true security of our future…

Most of the discussion here has been about oil use for transport and fossil fuels for electricity generation. We also need to look hard at our use of fossil fuels for heating and industrial use – coal because of its high CO2 generation, and oil and gas because they can be used for transport.

Fixed applications are better suited for using renewable resources directly (solar, geothermal for heating) or indirectly via electricity generation. Even if off-peak electricity is used when it is cheap and fossil fuels are used when electricity is in demand is better that simply burning the fossil fuels all the time.

Some applications require higher temperatures than are available from renewable resources such as geothermal. In these cases, it may make economic sense to use the geothermal as a preheater and to use an alternative energy source to generate the higher temperatures after that.

The range of fuels for fixed applications is wider than for transport as size and weight are less of an issue. It is easier to burn wood in a school boiler than in a car. Ideally if wood is burned for heating, it would be only while electricity prices are high and would be in a co-generation application so some electricity is generated as well as the heat.

There are lots of good options – let us take some of them and forget about converting lignite to diesel.

Population pressure, industrialisation (hence release of a variety of compounds with far greater activity than just CO2, causing local and global pollution and climate change), and use of long ago sequestered carbon, these are the drivers that are causing us to see the limits for finite expansion more clearly, and feel the effects.

Many people don’t care enough about climate change to be involved in solutions, but put peak oil in front of them, something that affects anyone, immediately, as a matter of survival primarily, and way of life secondly, then this *can* be a driver to implement alternatives that also just happen to be what we need to reverse the carbon cycle, *and* decrease other emissions from industry, agriculture, and daily human activity.

The argument is, solve the peak oil problem locally and nationally, properly, not just as another finite environmental exploitive system (fuels from lignite? NO THANK YOU!), then we do have a chance of turning around a short term immediate problem, and a longer term problem which is already demonstrating its’ presence, and in the future, just as severe.

How we do this is now the question, time-lines and details of the problems are definitely (infinitely?) arguable, and debated “ad nauseum”. In a political forum of fairly like-minded people, we could also be focussing on agreed (or trying to agree on!) scenarios, and the *means* of change, for a raft of likely solutions to fit all situations and communities.

We must recognise we have an unavoidable situation to face, continue to gather the political and social momentum required to support the national efforts and policy essential to develop industry and infrastucture for a more sustainable, fuel, energy, industrial and agricultural renewable resourced economy, and help the acceptance of any necessary social change – over any *successive* governments, not just an electionary cycle.

I for one see huge potential for careers in “green” industry, in addition to the “survival” benefits.

If primary agriculture already supports such a wide range of other downstream economic and social activity, how many more jobs and careers could be created by integrated fuel and energy and energy schemes, some centralised to take advantage of large amounts of remote marginal land, others de-centralised to provide *local* community needs?

We need to sell these ideas in various ways, to the public, to the “bean” counters, to those in positions of power, funding potential, national and local body planning. We need to provide the structure to enable those with the vision, motivation, technical know-how, and interest to be involved. We face a very uncertain future if we do not act together.

I personally think we’re more likely to avoid nuc war over oil than we are catastrophic climate change, because the latter is being locked in now and once past a certain point there will be nothing we can do to stop it.

BUT, I don’t at all mean to minimise the hugh issue peak oil represents. I was just reacting to Shunda’s latest ridiculous attempt to deflect attention from AGW by pretending it isn’t an issue green minded people should be worried about. That is bullshit as ever.

The evidence is equally as strong and ultimately warming will impact us in a MUCH greater way. Further, we have to be on the downward slope of emissions by 2015, which makes it even more urgent. What we do now will affect the survivability of our species, while getting peak oil wrong won’t come close to that.

You are of course absoutely right. However, you are also absolutely wrong.

AGW will utterly todge the planet at some point in the future. At this time, there is no evidence that we are doing (or even planning on doing) anything to realistically fix that. Hell, we can’t even decide if its a problem or not. (lets not debate that one here, ok, the choir are in attendance, it would be a pointless threadjack)

However, the real impact of peak oil will be felt by every car driver on the planet within the next decade or two, and thus will become a really big issue. Maybe sufficiently big that we’ll be in a nuclear winter well before AGW is an issue.

To repeat: Peak Oil is the big issue because of its imminence, and because of the geo-politics involved, and because has the possibility to become very ugly very quickly. Within the next couple of decades.

Since we have developed a population base and economy dependent on fossil fuels, we need to be planning and implementing a society that runs pretty much “business as usual” (albeit more efficiently) without oil as the primary driver. It’s not rocket science that people, communities and countries that have managed to do this will be a magnet for migration and investment – survival begs movement and change!

Several things have to happen, “government” has to accept inevitable change, and support a redevelopment of infrastructure, using taxpayer dollars, willing investors, and available fossil fuels while we have them; taxpayers (even the itinerant and most “blind”)have to “see” and accept the cost, and vital necessity for change in behaviour, infrastructure, personal transport methods and machinery, and recognise the consequences of having *no* alternatives in place when the cost of imported fuels inflates beyond everyday affordability, *and* if we lose any regular deliveries and use any strategic reserve, an incredibly likely scenario as demand outstrips supply in the not-so-distant future.

It’s a form of insurance policy, if a raft of national and local alternatives are done well, would price and availability of imported transport fuels matter?

The next step would be to reduce dependence on oil-based products/by-products as much as possible, across the board, by developing the expertise and technology to produce fertilisers, and synthesize plastics, rubber, etc from natural sources wherever we can.

If we do not make a concerted move to be less dependent on imported oil and oil based products for transport, agriculture, food, goods, materials, and trading etc, our fortunes (mis-fortunes!) will continue to be inextricably and directly linked to Opec, and the actions and economy of large nations. Not a scenario I wish for my children or anyone in this country.

Very refreshing to see a “bread and butter” Green post. These issues are far more important than AGW IMHO because the effects will be felt much sooner and will affect society in a more profund way (in the short term at least).
No body can argue that the oil isn’t going to run out you see, so a much more rational way to sell the sustainability message.

Sorry Shunda, can’t let this go by. The evidence is equally as strong and ultimately warming will impact us in a MUCH greater way. Further, we have to be on the downward slope of emissions by 2015, which makes it even more urgent. What we do now will affect the survivability of our species, while getting peak oil wrong won’t come close to that.

I have been ruminating on the interrelationship between energy and money.

In an energy constrained future, where will the safe havens that capital will run to? The places with the most energy, especially the most renewable energy. For it is only in those places that there will be any chance of preserving capital, let along growing it. The economies that seek to run off oil will not be worth investing in as their fate will be sealed.

Perhaps in the future, rather than investment being attracted to places with lax labour laws and low tax laws, it will be attracted to places with the best energy supplies.

Seen in that light, investments in renewable energy (sooner rather than later) can be seen as an insurance policy to guard against economic collapse caused by capital flight.

The massive one-time cost of electrification. Electrification removes the requirement for diesel fuel entirely. This is no small issue, and whether it is a great deal more efficient is neither here nor there.

The difficulty of keeping trucks in Diesel fuel when the fishing boats and farm tractors need it.

The expense to the society of not having any alternative to competing in a market that is going to be dominated by countries with larger armies, navies and budgets to get what they reckon they need more than we do.

John… who told you we hate electricity generation? Tisn’t true. Nor is there any particular need to go nuclear here. We have more renewable energy available to us than most nations twice our size.

Road transport is heavily subsidised by the infrastructure we all pay for compared to rail: cost comparisons and profitability are therefore skewed to the point of being meaningless. Rail is an efficient means of bulk movement when you look at the energy expenditure overall.

The other (often hidden) part of peal oil is our reliance of oil for plastics of most forms. That’s going to bite bigtime!

We could do an astonishing amount with coastal shipping, particularly if we managed to create some standardized RORO ferry type arrangements. The efficiency is there to be had, and the fact is that ships traveling 24×7 cover astonishing amounts of distance with exceedingly heavy loads in relatively short periods of time. Assume 14 knots advance and leave Auckland at 0900 on Wednesday. The load reaches Christchurch at 0500 Friday… possibly earlier. The rub here is that there isn’t actually enough volume of traffic to do that even on a daily basis… and it would take two ships operating continuously to do it daily.. or 3 to do it properly with time off for maintenance. Less frequent service introduces additional delay but increases the loading factor for the ships which can be larger and faster.

Rail between city centers on our respective islands is not unattractive in comparison to roads, coastal shipping, and aircraft. Basically it is between roads and rail… and electrification of the rail lines is an important step change in efficiency and effectiveness of the rail options.

Kerry – that’s good that coastal shipping is viable, (or almost viable) for some freight.

As for rail, it would be hard to find any country in the world where rail has more disadvantages than NZ. We have –
– a small population
– low density
– steep topography
– a watery gap in the middle
– we are not connected by land to any other countries.

I find the blanket push for rail by some people a bit “head-in-the-sand”. Yes – we should push where it is efficient – bulk point to point loads, and passenger transport where population is high enough.

But the best efficiency for most of NZ will always be roads. So we need to invest in making them better so vehicles use less fuel on them, and on fuel efficiency from the vehicles themselves (until we eventually switch over to electric).

Peak Oil is the single most important issue facing us. AGW is vaguely interesting ‘n all, but the ugly truth is the big countries don’t really care about a few ickle countries getting their feet wet, or indeed being submerged altogether.

Lack of crude for juice for cars, on the other hand, is the stuff America goes to war over. So it almost cant help but end badly.

Many people think that there are realistic alternatives to petrol and diesel for transport and other such stuff, but where there are alternatives, none of them have the ability to scale to the capacity required, either at all, or in a reasonable timeframe. For example, theres some lovely work been done on using nukes to convert Canadian tar-sands into oil. The problem is, if you work the numbers, they need to build 1200 reactors a year….. eek.

We already do a weekly service Auckland, Lyttelton, Wellington, Nelson Tauranga and another on the West Coast through New Plymouth. Tried Napier for a while.
The cargo quantities are there. Even from Gisbourne. It has mostly been periodic undercutting from overseas ships, rail and road operators that has prevented a continuous service. They pinch the cream and then withdraw or put their prices up as soon as the local shipping service has gone.

We should already be a world leader in electric commuter and local transport vehicles with our reserves of sustainable electricity. The intermittent supply from some renewables is less of a problem with a smart grid and vehicles plugged in during low demand times.

We have options with tidal and distributed power generation that most of the world will envy.

I differ from some. I think the roads and rail for intercity travel and transport, and weekends and holidays, should be as efficient as possible because that will be where we will concentrate fossil fuel use.

Whether you believe in AGW or not we should aim to have at least half our total energy use from renewables as soon as it is politically possible. Current levels of fossil fuel use are unsustainable both economically and environmentally.

Our current spend of about 7000 Million dollars annually on fossil fuels is a large component in our balance of payments deficit and borrowing.

Those who think we are going back to some agrarian horse drawn Utopia are kidding them selves. Wellingtonians in particular could not even feed themselves from their local area.

Now Photo. If there was a feeder container ship service from Gisbourne you would have a cheaper option.
If locals had supported the Napier Auckland service you would still have that option.
Unfortunately rail and trucking are subsidised, so that coastal ships cannot get enough cargo.
Local ships that could provide a regular service get their runs cherry picked by international lines making them un-economic.

@ Liberty Scott the line there has suffered from a death-cycle over decades where poor investment led to poor services, ripping up sidings led to poor accessibility, less customers led to less trains leading to less customers.
It’s a vital strategic community asset and if we factored in oil price risk along with other environmental externality benefits to its business case I think the economic argument for closure wouldn’t hold water.
I’m also hopeful Hikurangi Forest Farms will be its anchor tenant and rail wood products in containers to Napier.

Libertyscott: The oil price in the future will at times be quite low – especially during the periodic recessions caused by oil price spikes. Predicting the future price in such a volatile market is an exercise in futility. I found that out the hard way.

It may surprise you Libertyscott to know that money is the not prime motivator for many of us – sustainable environment and society is.

There isn’t any one single solution to the reality that we will have to do without or with less oil sometime in the nearish future – the point is to plan for it rather than expect the market to come up with quick solutions. It might, but then it might not, or the ‘solution’ might benefit only the very rich (surprise, surprise) and have detrimental effects on the environment and/or people. Now, that is 19th century thinking.

Thirty or so years ago, National’s Think Big projects included the gas-to-gasoline plant at Waitara. Jeanette said then that turning natural gas into gasoline with a loss of 67% efficiency was not a good use of a resource and that using the gas to give us time to wean ourselves off the oil dependency for vehicles was a better way to use the finite resource.

Well, they didn’t listen and, as she and others predicted, the gas ran out and we are still stuck with imported oil and no real advancement in finding other ways to fuel our various vehicles.

Greens are still looking ahead, debating the possibilities, including some of the ones you mention, but being realistic about it. What constructive ideas do you have to offer?

Very refreshing to see a “bread and butter” Green post. These issues are far more important than AGW IMHO because the effects will be felt much sooner and will affect society in a more profund way (in the short term at least).
No body can argue that the oil isn’t going to run out you see, so a much more rational way to sell the sustainability message.

Half the problem is that people remember being told in the 1970s that we were going to be out of oil by the year 2000 – and of course, ten years later, we are still driving to work.

The other half of the problem is that your solutions are not effective at the present – a competitive public transport system can only really work in Auckland, Wellington and Christchurch, and rail is basically limited to bulk haul and some “consolidation” work – you aren’t going to be able to go back to 19th Century thinking for some time.

I would also note that of the four oil crises you mentioned, only one can be directly linked with the economic crisis that followed (1973). The 1979 recession was almost certainly caused by Volkner trying to get inflation in the US under control, the 1990 recession was largely due to the side effects of the 1987 Crash, the S&L crisis in the US and the short term effects of the liberalisation agenda, and we all know that the current recession was caused by the sub-prime mortgage market and all that other fancy stuff, and that was starting to unravel in 2007.

Thinking local is not sufficient when it comes to renewable sources of electricity. While local generation saves on transmission, most renewable electricity resources are intermittant in nature and many of those that are not intermittant cannot be easily ramped up to meet peak production. Part of the solution to this dillema is spacial diversity, i.e. taking advantage of the peaks and troughs in electricity generation not being the same at all locations – but this requires thinking outside just the local area. Another part of the solution is diversity across resource types, such as using a mix of wind, wave, geothermal, hydro, etc but few locations have more than one such resource. This is why we have a transmission grid, and why a good transmission grid is essential to meeting our renewable energy goals.

I expect you’re buying oil futures so you can profit enormously from your predictions about future oil prices. If you do that you can then donate the proceeds to charities to do all the good work you seek on the environment and to help people.

I guess if you’re not buying oil futures then you don’t really believe your own rhetoric about oil prices.

There will be a transition from oil if prices get sustainably higher because there are several alternatives, from electric vehicles to fuel cells and second generation biofuels. It wont mean a wholesale shift to rail because the main difference in costs between rail and road transport is the high cost of capital in rail tied up in bespoke infrastructure shared by very few users. Growth in car travel might have a blip, but the long run trend to personal mobility will continue because the advantages of it are obvious to those who choose it.

As emotional as you might get about the Gisborne-Napier rail line the simple truth is that most of the bulk freight leaving Gisborne goes by sea, and the distances from forest and mill to port are too short for rail to ever be effective. Despite a fortune being poured into that line over the last seven years it still only barely sustains a weekly freight train mostly for fertiliser that comes from Awatoto (so is on the rail line). If the line closed it would make the difference of one truck a day.

Oh and if you want to promote local organic food then I’d suggest you have bigger issues for the New Zealand economy than oil, as you haven’t seen a recession until the world shuts out New Zealand’s primary produce.

Go Gareth. And congratulations to Clint Smith on an truly excellent paper on global oil depletion with a NZ perspective. The emphasis on imminence of the next oil shock (2012?) and its profound effects on NZ’s economy is what stands it apart. eg. the conclusion that domestic oil production cannot insulate New Zealand from global oil price shocks because New Zealand pays the world price for goods like oil.
There is more on the hype and hoopla about NZ’s “potential” oil reserves and how they cannot save us from the effects of the next oil shock here…http://oilshockhorrorprobe.blogspot.com/2010/10/peak-hype-on-new-zealands-offshore-oil.html